Your Emergency Fund: How to Decide If An Expense Is an Emergency or Not?

Written By Mary Beth Eastman
Last updated May 22, 2018

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Personal Finance
May 22, 2018

Simple. Thrifty. Living.

You worked hard to save money for your emergency fund, but it’s a finite resource. Before you take cash out of your savings for an expense, it’s essential to determine whether it’s an actual emergency and the criteria you base this decision on.

What are the consequences of waiting to pay this expense? You want to focus your emergency funds on genuinely urgent situations that would have an extremely negative impact on your life.

For example, paying your utility bills or your rent following a job loss would be a great use for this fund. If you’re unable to get to work without a working vehicle, you could end up losing your job. By dipping into this savings, you can stop this event from being a problem.

You can plan savings goals around regularly recurring expenses, so try to avoid your emergency fund for this purpose. You want to cover truly unexpected costs that you would not be able to predict.

Can you get by without covering that bill from your emergency savings? Wants can sometimes feel like needs when you’re making this decision. Take some time to think about whether it’s necessary for the well-being of you and your family. And there may be other ways to get cash fast without touching your nest egg.

Are there any other options to help with the situation other than paying the expense right now? For example, could you carpool with a coworker or go on a payment plan with a utility company? Look for ways to pay when you don’t have an emergency fund and how viable they would be for addressing a problem.

Sometimes it’s easy to second guess yourself and shy away from using savings even in a true emergency. Once you’ve worked through these questions and your need is urgent, then pay that expense. You’ve been building up your emergency fund for this very purpose.

Emergencies are stressful even when you have the money to cover them. Ensure that you’re making the right decision when you use your emergency accounts, so you don’t end up in a worse position sometime in the near future.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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